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ISLAMIC BANKS’ MARKET POWER, STATE-OWNED BANKS, AND RAMADAN: EVIDENCE FROM INDONESIA

Tastaftiyan Risfandy (), Wahyu Trinarningsih (), Harmadi Harmadi () and Irwan Trinugroho
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Tastaftiyan Risfandy: Faculty of Economics and Business, Universitas Sebelas Maret, Jl. Ir. Sutami 36A, Surakarta 57126, Indonesia
Wahyu Trinarningsih: Faculty of Economics and Business, Universitas Sebelas Maret, Jl. Ir. Sutami 36A, Surakarta 57126, Indonesia
Harmadi Harmadi: Faculty of Economics and Business, Universitas Sebelas Maret, Jl. Ir. Sutami 36A, Surakarta 57126, Indonesia
Irwan Trinugroho: Faculty of Economics and Business, Universitas Sebelas Maret, Jl. Ir. Sutami 36A, Surakarta 57126, Indonesia

The Singapore Economic Review (SER), 2019, vol. 64, issue 02, 423-440

Abstract: We use a monthly dataset to analyze whether Islamic banks have greater market power compared with their conventional counterparts. Using a sample of Indonesian banks, we find that Islamic banks possess greater market power than conventional banks. This condition does not hold, however, when we compare state-owned Islamic and conventional banks. We also find some specific determinants of Islamic banks’ market power: the Ramadan holy month (positive impact), the proportion of profit-and-loss sharing in their financing (negative impact), and the presence of a Sharia board (positive impact). Interestingly, Ramadan benefits not only Islamic banks but also conventional banks. Our findings support prior literature emphasizing the role of religiosity in Islamic banks’ behavior.

Keywords: Lerner index; Islamic banks; ownership; religiosity; Ramadan; Indonesia (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1142/S0217590817500229

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